Big Lots 2013 Annual Report Download - page 177

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(5) Purchase obligations include outstanding purchase orders for merchandise issued in the ordinary course of our
business that are valued at $464.6 million, the entirety of which represents obligations due within one year of
February 1, 2014. In addition, we have a purchase commitment for future inventory purchases totaling $49.0 million
at February 1, 2014. While we are not required to meet any periodic minimum purchase requirements under this
commitment, we have included, for purposes of this tabular disclosure, the value of the purchases that we anticipate
making during each of the reported periods as purchases that will count toward our fulfillment of the aggregate
obligation. The remaining $115.3 million of purchase obligations is primarily related to distribution and
transportation, information technology, print advertising, energy procurement, and other store security, supply, and
maintenance commitments.
(6) Other long-term liabilities include $21.4 million for obligations related to our nonqualified deferred compensation
plan, $6.5 million for expected contributions to the Pension Plan and our nonqualified, unfunded supplemental defined
benefit pension plan (“Supplemental Pension Plan”), $2.6 million for unrecognized tax benefits, and $0.5 million for
closed store lease termination costs related to stores closed in 2013 or earlier. Pension contributions are equal to
expected benefit payments for the nonqualified plan plus expected contributions to the qualified plan using actuarial
estimates and assuming that we only make the minimum required contributions (see note 8 to the accompanying
consolidated financial statements for additional information about our employee benefit plans). We have estimated the
payments due by period for the nonqualified deferred compensation plan based on an average of historical
distributions. We have included unrecognized tax benefits of $2.6 million for payments expected in 2013 and $0.7
million of timing-related income tax uncertainties anticipated to reverse in 2013. Unrecognized tax benefits in the
amount of $19.0 million have been excluded from the table because we are unable to make a reasonably reliable
estimate of the timing of future payments. Our closed store lease termination cost payments are based on contractual
terms.
Off-Balance Sheet Arrangements
For a discussion of the KB Bankruptcy Lease Obligations, see note 14 to the accompanying consolidated financial statements.
Because the KB Toys business filed for bankruptcy again in December 2008 and liquidated all of its store operations, we
accrued a contingent liability on our balance sheet at January 30, 2010, for 31 KB Toys store leases for which we may have an
indemnification or guarantee obligation and a former KB Toys corporate office lease for which we took an assignment in 2009.
During the fourth quarter of 2013, we re-evaluated our liability and determined the likelihood of an unfavorable settlement had
become remote; therefore at February 1, 2014, we had no contingent liability related to this matter. Because of uncertainty
inherent in the assumptions used to estimate this liability, our estimated liability could ultimately prove to be understated and
could result in a material adverse impact on our financial condition, results of operations, and liquidity.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America (“GAAP”) requires management to make estimates, judgments, and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. The
use of estimates, judgments, and assumptions creates a level of uncertainty with respect to reported or disclosed amounts in our
consolidated financial statements or accompanying notes. On an ongoing basis, management evaluates its estimates,
judgments, and assumptions, including those that management considers critical to the accurate presentation and disclosure of
our consolidated financial statements and accompanying notes. Management bases its estimates, judgments, and assumptions
on historical experience, current trends, and various other factors that management believes are reasonable under the
circumstances. Because of the inherent uncertainty in using estimates, judgments, and assumptions, actual results may differ
from these estimates.
Our significant accounting policies, including the recently adopted accounting standards and recent accounting standards -
future adoptions, if any, are described in note 1 to the accompanying consolidated financial statements. We believe the
following assumptions and estimates are the most critical to understanding and evaluating our reported financial results.
Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our Board of
Directors.